Member Article

Cable worries over Help to Buy

The Business Secretary, Vince Cable, has raised concerns over the Government’s ‘Help to Buy’ scheme, suggesting it could create a housing bubble.

Speaking on the BBC’s Andrew Marr show on Sunday, Dr Cable said: “I did warn about it and I am worried about the danger of getting into a new housing bubble. The Help to Buy scheme is actually quite complex.

“One part provides mortgages against new homes and the other the proposal that hasn’t been implemented, which is providing a guarantee for a limited range of mortgages, could be a problem - it could inflate the market.”

The Help to Buy scheme allows homebuyers to purchase a house with a 5% deposit and government will provide a 20% loan of the price.

It was launched this year and has provoked debate on how the Government should tackle the country’s housing issues.

Graeme Leach, chief economist at the Institute of Directors, said: “The housing market needs help to supply, not help to buy and the extension of this scheme is very dangerous. Government guarantees will not increase the supply of homes, but they will drive up prices at a time when it seems likely that house prices are already overvalued.

“When the scheme is withdrawn any rise in prices that has taken place will be undermined, with potentially disastrous results. There is a real risk that the housing market will become dependent on the underwriting by government, making it very difficult politically to shut the scheme down. This should be of great concern.

“The world must have gone mad for us to now be discussing endless taxpayer guarantees for mortgages.

“Instead of trying to pump-up prices, the Government should focus on relaxing planning laws and reducing Local Authority charges on developers to make it easier to build more homes.”

This was posted in Bdaily's Members' News section by Tom Keighley .